Before the SECOND REPORT AND ORDER

Federal Communications Commission FCC 99-229

Before theFederal Communications Commission

Washington, D.C. 20554

In the Matter of ))

Communications Assistance for Law ) CC Docket No. 97-213Enforcement Act )

SECOND REPORT AND ORDER

Adopted: August 26, 1999 Released: August 31, 1999

By the Commission:

TABLE OF CONTENTSParagraph

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

III. DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6A. Section 102: Definition of “Telecommunications Carrier” . . . . . . . . . . . . . . . . 6

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6General Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Conclusions Regarding Specific Types of Service Providers . . . . . . . . . . . . . 14

B. Section 109: Requests for Relief Under the“Reasonably Achievable” Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

IV. PROCEDURAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

V. ORDERING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

APPENDIX A: List of Commenters

APPENDIX B: Final Regulatory Flexibility Analysis


1 Pub. L. No. 103-414, 108 Stat. 4279 (1994) (codified as amended in sections of 18 U.S.C. and 47 U.S.C.).

2 47 U.S.C. §§ 1001, 1008.

3 18 U.S.C. §§ 2510-2522. Otherwise, Section 705 of the Communications Act protects the privacy expectations ofthose who use the nation's communications systems by prohibiting the interception and disclosure ofcommunications without the sender's consent. 47 U.S.C. § 605.

4 See H.R. Rep. No. 103-827(I), at 15-18 (1994), reprinted in 1994 U.S.C.C.A.N. 3489, 3492-96.

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I. INTRODUCTION

1. In this Second Report and Order, we continue our implementation of theCommunications Assistance for Law Enforcement Act (CALEA or the Act)1 by addressingcertain issues relevant to sections 102 and 109 of the Act.2 In particular, we examine thedefinition of “telecommunications carrier” set forth in section 102, which determines whichentities and services are subject to the assistance capability and other requirements of CALEA. After considering the definition set forth in the Act and the relevant legislative history, we discusshow the definition applies to various types of service providers. Further, we provide guidanceregarding the factors we will consider in making determinations under section 109 of the Act as towhether compliance with CALEA's assistance capability requirements is reasonably achievable forparticular carriers, and the showings we expect entities filing petitions under section 109 to make.

II. BACKGROUND

2. Law enforcement agencies conduct electronic surveillance as authorized by court orderunder chapter 119, title 18 of the U.S. Code.3 In response to concerns that emerging technologiessuch as digital and wireless were making it increasingly difficult for telecommunications carriers toexecute authorized surveillance,4 CALEA was enacted on October 25, 1994. CALEA does notmodify the existing surveillance laws. Instead, it requires carriers to ensure that their facilities arecapable of providing the surveillance law enforcement is authorized to conduct. Specifically,section 103(a) of CALEA requires that “a telecommunications carrier shall ensure that itsequipment, facilities, or services that provide a customer or subscriber with the ability tooriginate, terminate, or direct communications” are capable of (1) expeditiously isolating thecontent of targeted communications transmitted by the carrier within its service area; (2)expeditiously isolating information identifying the origin and destination of targetedcommunications; (3) transmitting intercepted communications and call identifying information to


5 47 U.S.C. § 1002(a).

6 47 U.S.C. § 47.1006(a)(1).

7 47 U.S.C. § 1006(a). Under section 107(b), if industry associations or standard-setting organizations fail to issuetechnical requirements or standards, or if such requirements or standards are found to be deficient by aGovernment agency or other person, the Commission may establish technical requirements or standards by rule. 47 U.S.C. § 1006(b).

8 Communications Assistance for Law Enforcement Act, Notice of Proposed Rulemaking, CC Docket No. 97-213,13 FCC Rcd 3149 (1997) (NPRM).

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law enforcement agencies at locations away from the carrier's premises; and (4) carrying outintercepts unobtrusively, so that targets are not made aware of the interception, and in a mannerthat does not compromise the privacy and security of other communications.5 These corefunctional requirements are referred to as the assistance capability requirements of CALEA.

3. CALEA does not specify technologies or standards that carriers must use to meet theseassistance capability requirements. Instead, to ensure the implementation of section 103, section107(a) of the Act directs the Attorney General, along with federal, state, and local lawenforcement agencies, to consult with “appropriate associations and standard-settingorganizations of the telecommunications industry, with representatives of users oftelecommunications equipment, facilities, and services, and with State utility commissions.”6 Atelecommunications carrier will be found to be in compliance with the requirements of section 103if it complies with “publicly available technical requirements or standards adopted by an industryassociation or standard-setting organization, or by the Commission . . . .”7 In December 1997, theTelecommunications Industry Association and Committee TI, sponsored by the Alliance forTelecommunications Industry Solutions, announced the adoption and publication of an interimstandard for wireline, cellular, and broadband Personal Communications Services carriers, J-STD-025 (J-Standard).

4. Other provisions of CALEA further support the central assistance capabilityrequirements. Section 104 prescribes a mechanism for quantifying the extent of carriers'assistance capability. Section 105 ensures the integrity and security of telecommunicationssystems. Section 106 mandates cooperation of equipment manufacturers and telecommunicationssupport service providers. Section 108 provides for enforcement orders.

5. The Commission began its implementation of CALEA with the release of a Notice ofProposed Rulemaking in October 1997.8 Since that time, we have taken several actions as part of


9 This extension was granted pursuant to the Commission's authority under section 107(c) of CALEA. Petition forthe Extension of the Compliance Date under Section 107 of the Communications Assistance for Law EnforcementAct, Memorandum Opinion and Order, 13 FCC Rcd 17990 (1998) (Extension Order).

10 Communications Assistance for Law Enforcement Act, Further Notice of Proposed Rulemaking, CC Docket 97-213, 13 FCC Rcd 22632 (1998) (Standards Further Notice).

11 47 U.S.C. § 1004; Communications Assistance for Law Enforcement Act, Report and Order, CC Docket 97-213,FCC 99-11 (rel. Mar. 15, 1999), recon. sua sponte, Order on Reconsideration, FCC 99-184 (rel. Aug. 2, 1999).

12 Communications Assistance for Law Enforcement Act, Third Report and Order, CC Docket No. 97-213, FCC99-230 (rel. Aug. 31, 1999) (Third Report and Order).

13 47 U.S.C. § 1002(a).

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this proceeding. First, finding that compliance with the assistance capability requirements ofsection 103 was not reasonably achievable by the original statutory deadline of October 25, 1998,we granted a blanket extension of the deadline for all telecommunications carriers until June 30,2000.9 We then adopted a Further Notice of Proposed Rulemaking seeking comment on allegeddeficiencies in the interim standard for wireline, cellular, and broadband Personal CommunicationsServices carriers.10 In March of this year, we released a Report and Order establishing systemssecurity and integrity regulations that telecommunications carriers must follow to comply withsection 105 of CALEA.11 Today, in addition to adopting this Second Report and Orderaddressing sections 102 and 109 of CALEA, we adopt a Third Report and Order that announcesthe Commission's decisions on the J-Standard and additional technical requirements.12

III. DISCUSSION

A. Section 102: Definition of “Telecommunications Carrier”

6. Background. One of the key questions in this proceeding is what entities and whichof their services are subject to the requirements of CALEA. Section 103 specifies that theassistance capability requirements apply only to telecommunications carriers,13 which section102(8) defines primarily in terms of the kinds of services offered. Thus, section 102(8)(A) and(B) provide:

The term “telecommunications carrier”—


14 47 U.S.C. § 1001(8)(A)-(B).

15 47 U.S.C. § 1001(8)(C).

16 NPRM at ¶ 17.

17 Id. at ¶ 16. See infra para. 14.

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(A) means a person or entity engaged in the transmission or switching of wireor electronic communications as a common carrier for hire; and (B) includes— (i) a person or entity engaged in providing commercial mobile service (asdefined in section 332(d) of the Communications Act of 1934 (47 U.S.C. 332(d)));or (ii) a person or entity engaged in providing wire or electronic communicationswitching or transmission service to the extent that the Commission finds that suchservice is a replacement for a substantial portion of the local telephone exchangeservice and that it is in the public interest to deem such a person or entity to be atelecommunications carrier for purposes of this title . . . .14

Section 102(8)(C) then identifies two categories of entities that are exempted from the definition:

(i) persons or entities insofar as they are engaged in providing informationservices; and (ii) any class or category of telecommunications carriers that the Commissionexempts by rule after consultation with the Attorney General.15

7. In the NPRM we stated our view that “Congress intended the obligations of CALEAto have broad applicability, subject only to the limitations explicitly contained in the [Act].”16 Wealso identified several kinds of service providers subject to FCC jurisdiction, and sought commenton the extent to which they were or were not subject to CALEA. Those we tentatively concludedwould be subject to CALEA include, for example, local exchange carriers, utilities offeringtelecommunications services to the public, commercial mobile service providers, and in generalany entity that holds itself out to serve the public indiscriminately in the provision of anytelecommunications service.17

8. We also observed in the NPRM that CALEA’s 1994 definition of the term“telecommunications carrier” differs from the definition of that term in the Telecommunications


18 The definition of “telecommunications carrier” adopted in the 1996 Act encompasses “any provider oftelecommunications services, except that such term does not include aggregators of telecommunications services. . . .” 47 U.S.C. § 153(44). The 1996 Act defines “telecommunications service” as “the offering oftelecommunications for a fee directly to the public, or to such classes of users as to be effectively available directlyto the public, regardless of the facilities used.” 47 U.S.C. § 153(46).

19 NPRM at ¶ 15.

20 Id.

21 Commenters supporting a broad construction express concern that services that should be covered by CALEAmight fall in an exempt category, posing a risk to public safety and national security. See, e.g., AmeritechComments at 2; CTIA Comments at 24; GTE Comments at 2; SBC Comments at 6; Southern Reply Comments at2-3; USTA Comments at 3-5. Others advocate a narrow construction, pointing out that a broad approach mightsweep in some services inappropriately, resulting in hardship for their providers. See, e.g., AT&T Comments at37-39; CTIA Comments at 23-24; Globecast Comments at 1-2; Metricom Reply Comments at 2-3; MotorolaComments at 2; TIA Comments at 2-5.

22 47 U.S.C. § 1002(a).

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Act of 1996 (1996 Act).18 We noted that Section 601(c)(1) of the 1996 Act specifically providesthat “[t]his Act and the amendments made by this Act shall not be construed to modify, impair orsupersede Federal, State, or local law unless expressly so provided in such Act or amendments,”and that nothing in the 1996 Act expressly modifies, impairs, or supersedes the CALEAdefinitions.19 Accordingly, we asked for comment on our tentative conclusion that CALEA'sdefinitions of “telecommunications carrier” and “information services” were not modified by the1996 Act.20

9. General Conclusions. We conclude that the language and legislative history ofCALEA provide sufficient guidance as to what the term "telecommunications carrier" means, suchthat it can be applied to particular carriers, their offerings and facilities. In reaching thisconclusion, we find that much of the debate in the comments over the scope of the definition isinconsistent with the express terms of CALEA.21 After reviewing the key elements of thedefinition, we examine below how it applies to various types of service providers.

10. As noted above, subsections 102(8)(A) and (B) identify what entities are subject toCALEA: essentially, common carriers offering telecommunications services for sale to the public. Section 103(a) clarifies that the assistance capability requirements apply to “equipment, facilities,or services that provide a customer or subscriber with the ability to originate, terminate, or directcommunications . . . .”22 The House Report provides further clarification in terms of the functions


23 H.R. Rep. No. 103-827(I), at 26 (1994), reprinted in 1994 U.S.C.C.A.N. 3489, 3503.

24 Id. at 21, reprinted in 1994 U.S.C.C.A.N. 3489, 3498.

25 See 140 Cong. Rec. H-10779 (daily ed. October 7, 1994) (statement of Rep. Hyde). See also H.R. Rep. No. 103-827(I), at 23, reprinted in 1994 U.S.C.C.A.N. 3489, 3500.

26 H.R. Rep. No. 103-827(I), at 21, reprinted in 1994 U.S.C.C.A.N. 3489, 3498.

27 47 U.S.C. § 1001(8)(C).

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of covered services, stating: “Thus, a carrier providing a customer with a service or facility thatallows the customer to obtain access to a publicly switched network is responsible for complyingwith the capability requirements.”23 The House Report also describes CALEA's focus in terms oflaw enforcement agencies' traditional surveillance requirements: “The only entities required tocomply with the [assistance capability] requirements are telecommunications common carriers, thecomponents of the public switched network where law enforcement agencies have served most oftheir surveillance orders.”24 Further, the legislative history contains examples of the types ofservice providers subject to CALEA: “The definition of ‘telecommunications carrier’ includessuch service providers as local exchange carriers, interexchange carriers, competitive accessproviders (CAPs), cellular carriers, providers of personal communications services (PCS),satellite-based service providers, cable operators, and electric and other utilities that providetelecommunications services for hire to the public, and any other wireline or wireless service forhire to the public.”25

11. The legislative history of CALEA makes clear that the requirements of CALEA donot necessarily apply to all offerings of a carrier. The House Report states: “[C]arriers arerequired to comply only with respect to services or facilities that provide a customer or subscriberwith the ability to originate, terminate or direct communications.”26 We therefore find that anentity is a telecommunications carrier subject to CALEA to the extent it offers, and with respectto, such services.

12. CALEA also makes clear that its requirements do not apply to certain entities andservices. Subsection 102(8)(C) of the definition specifically excludes information services,27 andthe legislative history makes clear that CALEA does not apply to private network services:

[T]elecommunications services that support the transport or switching ofcommunications for private networks or for the sole purpose of interconnectingtelecommunications carriers . . . need not meet any wiretap standards. PBXs are


28 H.R. Rep. No. 103-827(I), at 21, reprinted in 1994 U.S.C.C.A.N. 3489, 3498.

29 The portions of CALEA incorporated into the Communications Act are contained in Title III of CALEA;sections 101-112 are contained in Title I. Moreover, the CALEA definitions are set out “[f]or purposes of this[CALEA] subchapter. . . ,” while the definitions in the Communications Act apply “[f]or the purposes of this[Communications] Act . . . .” 47 U.S.C. §§ 1001, 153.

30 NPRM at ¶ 16. See also id. at ¶ 10.

31 Id. at ¶¶ 16-17. See also id. at ¶ 12.

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excluded. So are automated teller machine (ATM) networks and other closed networks. Also excluded from coverage are all information services, such as Internet serviceproviders or services such as Prodigy and America-On-Line. All of these private network systems or information services can be wiretappedpursuant to court order, and their owners must cooperate when presented with awiretap order, but these services and systems do not have to be designed so as tocomply with the capability requirements.28

13. We also conclude that CALEA's definitions of “telecommunications carrier” and“information services” were not modified by the 1996 Act, and that the CALEA definitionstherefore remain in force for purposes of CALEA. The pertinent sections of CALEA are not partof the Communications Act.29 Further, as we have previously noted, the 1996 Act expresslyprovides that it did not alter existing law by implication, and in the 1996 Act Congress did notrepeal or even address the CALEA definitions. Although we expect in virtually all cases that thedefinitions of the two Acts will produce the same results, we conclude as a matter of law that theentities and services subject to CALEA must be based on the CALEA definition discussed above,independently of their classification for the separate purposes of the Communications Act.

14. Conclusions Regarding Specific Types of Service Providers. As noted above, theNPRM discussed how CALEA might apply to various kinds of telecommunications serviceproviders. Those we proposed to include are:

! in general, any entity that holds itself out to serve the public indiscriminately in theprovision of any telecommunications service;30

! entities previously identified as common carriers for purposes of the CommunicationsAct, including local exchange carriers, interexchange carriers, competitive accessproviders, and satellite-based service providers;31


32 Id. at ¶ 16. See also id. at ¶ 12.


34 Id. at ¶ 20.

35 Id. at ¶ 17.


37 Id. at ¶ 16.


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! cable operators and electric and other utilities to the extent that they offertelecommunications services for hire to the public;32

! commercial mobile service (CMRS) providers;33 and

! providers of calling features such as call forwarding, call waiting, three-way calling,speed dialing, and the call redirection portion of voice mail.34

We also sought comment on the extent to which resellers should be treated as telecommunicationscarriers.35

15. On the other hand, we tentatively concluded that some categories of entities are nottelecommunications carriers subject to CALEA:

! private mobile service (PMRS) providers,36

! pay telephone providers,37 and

! information service providers, although we sought comment on CALEA's applicabilityto information services provided by common carriers.38

We also proposed not to exercise at this time the discretion granted to the Commission undersection 102(8)(B)(ii) to include within the definition of telecommunications carrier additionalproviders of “wire or electronic communication switching or transmission service to the extent



40 Id. at ¶¶ 18-19. See also id. at ¶ 13.

41 Id. at ¶ 17.

42 For comments supporting our tentative conclusion, see, e.g., AT&T Comments at 38-39; FBI Comments at ¶ 21; Metricom Reply Comments at 2-3; Motorola Comments at 2; SBC Comments at 6-8; TIA Comments at 2-3.

43 See supra para. 12.

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that . . . such service is a replacement for a substantial portion of the local telephone service.”39 We requested comment, however, on whether, pursuant to CALEA section 102(8)(C)(ii), anyclasses should be excluded from the definition of telecommunications carrier.40

16. Finally, we proposed not to adopt a definitive list of carriers subject to CALEAobligations, but did seek comment on including in the rules a list of examples of the types ofentities that are subject to CALEA to the extent they offer telecommunications service for hire tothe public.41

17. Common Carriers and Utilities. We adopt our tentative conclusion, with which mostcommenters agree, that all entities previously classified as “common carriers” should beconsidered telecommunications carriers for the purposes of CALEA, as should cable operatorsand electric and other utilities to the extent they offer telecommunications services for hire to thepublic.42 Such entities offer services (some subject to CALEA, some not) that use copper-wire,cable, fiber-optic, and wireless facilities to provide traditional telephone service, data service,Internet access, cable television, and other services. The Act's legislative history identifies suchentities as subject to CALEA to the extent that their service offerings satisfy CALEA's descriptionof covered services. Entities are not subject to CALEA, however, with respect to services andfacilities leased for private networks, pursuant to the statute.43 In addition, cable television is anexample of a service not covered by CALEA because it is not a “telecommunications” service,even if delivered via the same transmission facility as other, covered services.

18. We also find it unnecessary to adopt the FBI's recommendation that we not use theadverb “indiscriminately” in our elaboration of the definition of telecommunications carrier. TheFBI is concerned that the inclusion of this term may allow companies that hold themselves out toserve only particular groups to undermine CALEA, intentionally or inadvertently, by creating aloophole that would permit criminals to use telecommunications providers that do not


44 FBI Comments at ¶ 22.

45 See NPRM at ¶ 10, citing National Association of Regulatory Utility Commissioners v. FCC, 525 F.2d 630, 640(D.C. Cir.), cert. denied, 425 U.S. 922 (1976) (“NARUC I”). See also National Association of Regulatory UtilityCommissioners v. FCC, 533 F.2d 601 (D.C. Cir. 1976) (“NARUC II”), and Wold Communications, Inc. v. FCC,735 F.2d 1465, 1474-75 (D.C. Cir. 1984).

46 For example, “[c]ommon carriers must provide service on reasonable request if they have the capacity to do so,but this does not require them to increase capacity to accommodate more customers.” Information for Part 90Licensees Subject to Reclassification as Commercial Mobile Radio Service Providers on August 10, 1996, PublicNotice, 11 FCC Rcd 9267, 9270 (1996).

47 See NorLight, 2 FCC Rcd 132, 134, recon. denied, 2 FCC Rcd 5167 (1987) (“Whether a carrier is indifferentlyholding out its service to the public turns on whether its practice is to make individualized decisions in each serviceoffering. Pertinent to this analysis are whether service contracts are medium-to-long range, ensuring a relativelystable clientele, and the extent to which contracts are tailored to the needs of particular customers.”) See alsoRegulatory Treatment of Mobile Services, GN Docket No. 93-252, Second Report and Order, 9 FCC Rcd 1411,1427-31 (1994) (holding that even PMRS licensees are considered common carriers to the extent they sell serviceto the public).

48 See, e.g., FBI Comments at ¶ 21; SBC Comments at 6.

49 47 U.S.C. § 1001(8)(B)(i).

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indiscriminately offer their services to the public.44 As noted in our NPRM, the courts have heldthat a common carrier is one that holds itself out to serve the public indiscriminately.45 This doesnot amount to a threshold test that a service provider is a common carrier only if it serves all whoseek service.46 Instead, it is simply a restatement of the proposition that common carriage statusinvolves offering one's services to the general public.47 Our proposed statement conforms to along-standing judicial formulation of the meaning of the term “common carrier,” and we willadopt it as proposed.

19. CMRS. We adopt our tentative conclusion, which the commenters generally support,that CMRS providers should be considered telecommunications carriers for the purposes ofCALEA.48 This result is required by section 102(8)(B)(i) of CALEA, which states that thedefinition of “telecommunications carrier” includes “a person or entity engaged in providingcommercial mobile service (as defined in section 332(d) of [the Communications Act]).”49 Section 332(d) in turn defines the term “commercial mobile service” as “any mobile service . . .that is provided for profit and makes interconnected service available (A) to the public or (B) to


50 47 U.S.C. § 332(d)(1). The various categories of CMRS are identified in section 20.9 of the Commission's rules(47 C.F.R. § 20.9) and explained in more detail in the proceeding that implemented section 332. See, e.g.,Regulatory Treatment of Mobile Services, GN Docket No. 93-252, Second Report and Order, 9 FCC Rcd 1411(1994), and Third Report and Order, 9 FCC Rcd 7988 (1994). We note also that section 332(c)(1)(A) of theCommunications Act states that “[a] person engaged in the provision of a service that is a commercial mobileservice shall, insofar as such person is so engaged, be treated as a common carrier for purposes of this Act, exceptfor such provisions of title II as the Commission may specify by regulation as inapplicable to that service orperson.” 47 U.S.C. § 332(c)(1)(A).

51 AMTA Comments at 4-8. See also Metricom's Comments at 1, and 8-12 (de minimis interconnection with thePSTN should not give rise to CALEA responsibilities).

52 Nextel Comments at 6-7.

53 See supra note 50 and accompanying text.

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such classes of eligible users as to be effectively available to a substantial portion of the public . . ..”50

20. Certain commenters claim that some entities normally classified as CMRS should notbe considered subject to CALEA because they do not meet CALEA's definition oftelecommunications carrier. AMTA argues that CMRS providers serving niche business marketswith limited interconnect capability, such as Industrial/Business Radio Services licensees offeringfor-profit interconnected service, local interconnected SMR providers, and for-profit commercialinterconnected 220 MHz service licensees, should be excluded because they are nottechnologically capable of CALEA compliance.51 To the extent these services consist ofinterconnected service offered to the public, however, they meet the definition of CMRS set forthin section 332(d) of the Communications Act and the entities offering them therefore must beconsidered telecommunications carriers subject to CALEA.

21. Nextel concurs that “most CMRS services fall within the scope of CALEA’sobligations,” but argues that “CALEA obligations would have severe adverse technical,operational and financial impacts on (1) [‘traditional analog’] SMR systems that do not utilizeintelligent switching capability and offer seamless handoff to customers . . . , and (2) digital push-to-talk dispatch services that are offered on a stand-alone basis or as a unique feature in a packageof interconnected services,” and asks the Commission to find that compliance for such systems is“not reasonably achievable under any time frame.”52 We find that to the extent “traditional” SMRservice offers interconnection to the PSTN, it meets the definition of CMRS and thus is subject toCALEA, but otherwise not.53 Similarly, push-to-talk “dispatch” service is subject to CALEA tothe extent it is offered in conjunction with interconnected service, because in such case it is a


54 47 U.S.C. § 1006(c).

55 47 U.S.C. § 1008.

56 See H.R. Rep No. 103-827(I), at 21, 26, reprinted in 1994 U.S.C.C.A.N. 3489, 3498, 3503.

57 See, e.g., TIA Comments at 4-5; AMTA Comments at 3-4. AMTA states that PMRS operators should not beclassified as telecommunications carriers under CALEA because they do not provide interconnected service and donot have access to the PSTN, which AMTA contends is “the traditional focus of law enforcement.”

58 “[T]he term ‘private mobile service’ means any mobile service . . . that is not a commercial mobile service or thefunctional equivalent of a commercial mobile service . . . .” 47 U.S.C. § 332(d)(3).

59 See Regulatory Treatment of Mobile Services, Second Report and Order, 9 FCC Rcd 1411, 1428-29 (1994).

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switched service functionally equivalent to a combination of speed dialing and conference calling,but otherwise not. Thus, in any given case, the services an entity offers would determine itsCALEA responsibilities.

22. We appreciate that some CMRS offerings are limited such that, while they fall withinthe terms of CALEA, compliance with the CALEA assistance capability requirements may beeconomically burdensome, or even impossible. In these cases, providers are allowed to seekextensions under section 107(c),54 or may seek relief under section 109.55 We are also prepared toreexamine this issue once we have gained some experience in applying section 109. Exemptingentire classes of CMRS services is not warranted, however, absent a more complete record on theresultant impact on operators and on CALEA objectives. We remind all interested parties,however, that interconnection is a necessary element of the definition of CMRS, and that to theextent providers offer service that is not interconnected to the PSTN (e.g., dispatch service), theyare not subject to CALEA.56

23. PMRS. We conclude that PMRS operators are not telecommunications carrierssubject to CALEA when they offer PMRS services. We note, however, in response to thosecommenters who argue that a PMRS provider cannot be a telecommunications carrier subject toCALEA's requirements for any reason,57 that the determination of whether a particular mobileservice offering is private or common carrier depends on the nature of the service and to whom itis offered. Although private and common carrier services are by definition mutually exclusive,58 agiven carrier may offer both. Where a PMRS operator uses its facilities to offer interconnectedservice for profit to the public, or a substantial portion of the public, that service qualifies asCMRS,59 and thus is subject to CALEA.


60 Several commenters argue that resellers are telecommunications carriers for the purposes of CALEA. See, e.g.,Airtouch Reply Comments at 15-16; Ameritech Comments at 2; Bell South Comments at 5-6, Reply Comments at4-5; FBI Comments at ¶ 26; GTE Comments at 4; Omnipoint Comments at 7-8; PageNet Comments at 6; PCIAComments at 6; SBC Comments at 6-7; USTA Comments at 4. GTE and SBC suggest that purchasers ofUnbundled Network Elements (UNEs) should also be subject to all of CALEA’s requirements. GTE Comments at5; SBC Comments at 7. See also USTA Comments at 4. Motorola, on the other hand, argues for exclusion ofresellers on the basis that they are not facilities-based providers. Motorola Comments at 5.

61 We also note that the Commission has already ruled that resellers are common carriers for the purposes of theCommunications Act. See also PCIA Comments at 7-8; BellSouth Reply Comments at 5; both citing RegulatoryPolicies Concerning Resale and Shared Use of Common Carrier Services and Facilities, 60 FCC 2d 261, 308(1976).

62 TIA Reply Comments at 12; PCIA Comments at 8. See also SBC Comments at 6-7; GTE Comments at 4-5;PageNet Comments at 5-6.

63 See SBC Comments at 8.


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24. Resellers. After evaluating a record that is somewhat divided on this subject,60 weconclude that resellers, as telecommunications carriers under the terms of section 102, aregenerally subject to CALEA.61 We note, however, that resellers may own some facilities, such aselectronic switching equipment, and frequently operate hybrid networks consisting of both theirown facilities and resold services from other facilities-based carriers. We agree with TIA andPCIA that resellers' responsibility under CALEA should be limited to their own facilities.62 Resellers will therefore not be held responsible for the CALEA compliance responsibilities of thecarrier whose services they are reselling with respect to the latter's underlying facilities. Further,because their offerings are limited to essentially private networks, most PBX providers and manyaggregators would fall outside the scope of CALEA.63

25. Pay Telephone Providers. We will exclude pay telephone providers from thedefinition of telecommunications carrier. As discussed above, the CALEA legislative historystates that “[t]he only entities required to comply with the functional requirements aretelecommunications common carriers, the components of the public switched network where lawenforcement agencies have always served most of their surveillance orders.”64 Moreover, we findthat pay telephone providers do not have the information and the means to effectuate lawfulelectronic surveillance, which is maintained by the carriers who provide switched telephoneservices to pay telephone providers. We also note that no commenters oppose our tentative


65 See GTE Comments at 3; FBI Comments at ¶ 23; SBC Comments at 9.

66 FBI Comments at ¶ 29.

67 ACLU Comments at 11. See also AT&T Comments at 39-40; CDC Comments at 21-22; Metricom ReplyComments at 1-2; PCIA Reply Comments at 14.

68 Omnipoint Reply Comments at 6-7 (emphasis added by Omnipoint).

69 We do not credit Powertel's apparent suggestion that cellular carriers that provide service using GSM technologyare information services providers and should be excluded from CALEA's requirements. Powertel Comments at 2-3. CALEA, like the Communications Act, is technology neutral. Thus, a carrier's choice of technology whenoffering common carrier services does not change its obligations under CALEA. See, e.g., Inquiry Concerning theDeployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion,

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conclusion that pay telephone providers are not telecommunications carriers for the purposes ofCALEA.65

26. Information Services and Calling Features. Commenters unanimously agree with ourtentative conclusion that providers that exclusively offer information services (IS) (i.e., that donot also offer telecommunications services), such as electronic mail providers and on-line serviceproviders, are exempt from CALEA's requirements. There is sharp disagreement, however, onthe status of common carriers who also provide information services. The FBI states that “anyportion of a telecommunications service provided by a common carrier that is used to providetransport access to information is subject to CALEA's requirements.”66 On the other hand, manyother commenters argue that CALEA's IS exemption is not “based on the carrier offering theservices, but on the nature of the services . . . ,” and thus extends to all IS providers.67 Omnipointmaintains that “[CALEA's] text and structure excludes information services from the category ofservices covered by CALEA in two ways. First, section 102(8)(c) defines the term‘telecommunications carrier’ to exclude ‘persons or entities insofar as they are engaged inproviding information services.’ Second, section 103 contains a subsection entitled ‘limitations’that expressly states that CALEA's capabilities requirements ‘do not apply to . . . informationservices.’”68

27. Where facilities are used solely to provide an information service, whether offered byan exclusively-IS provider or by a common carrier that has established a dedicated IS systemapart from its telecommunications system, we find that such facilities are not subject to CALEA. Where facilities are used to provide both telecommunications and information services, however,such joint-use facilities are subject to CALEA in order to ensure the ability to surveil thetelecommunications services.69 For example, digital subscriber line (DSL) services are generally


and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of1996, Report, FCC 98-146, at ¶¶ 9 and 23 (rel. Feb. 1, 1999).

70 See the Commission's Report to Congress on the Commission's implementation of certain provisions of theTelecommunications Act of 1996 regarding the universal service system, in which the Commission summarized itsview of the relationship between telecommunications and information services: “[T]he categories of‘telecommunications service’ and ‘information service’ in the 1996 Act are mutually exclusive. Under thisinterpretation, an entity offering a simple, transparent transmission path, without the capability of providingenhanced functionality, offers ‘telecommunications.’ By contrast, when an entity offers transmission incorporatingthe ‘capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or makingavailable information,’ it does not offer telecommunications. Rather, it offers an ‘information service’ even thoughit uses telecommunications to do so.” Federal-State Joint Board on Universal Service, Report to Congress, CCDocket No. 96-45, 13 FCC Rcd 11501, 11520 (1998) (Stevens Report).

71 See North American Telecommunications Ass’n, 101 FCC 2d 349 (1985), recon. denied, 3 FCC Rcd 4385(1988).

72 H.R. Rep. No. 103-827(I), at 23, 26 (1994), reprinted in 1994 U.S.C.C.A.N. 3489, 3500, 3503

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offered as tariffed telecommunications services, and therefore subject to CALEA, even though theDSL offering often would be used in the provision of information services. On the other hand,where an entity used its own wireless or satellite facilities to distribute an information serviceonly, the mere use of transmission facilities would not make the offering subject to CALEA as atelecommunications service.70

28. There was little comment on our observation that CALEA covers entities that providecalling features such as call forwarding (and the corresponding voice mail feature, callredirection), call waiting, three-way (i.e., conference) calling, and speed dialing. These featuresare considered to be so closely related to basic service that we treat them as adjuncts to it.71 Theyare also like traditional pen registers and traps and traces in that they relate to the set-up orrouting of telecommunications, rather than its content. Moreover, the legislative history ofCALEA explicitly states that they are covered services.72 Accordingly, these specific callingfeatures will be considered covered by CALEA, whether offered over wireline or wirelessfacilities.

29. Other Issues. We do not believe it necessary at this time either to identify by ruleadditional classes of entities within CALEA's definition of telecommunications carrier, pursuant tosection 102(8)(B)(ii), or to exempt in our rules any classes pursuant to section 102(8)(C)(ii). Moreover, we agree with the FBI that codification in our rules of a list of examples would run the


73 A few commenters support the Commission's proposal to include in its rules an illustrative list of classes oftelecommunications carriers subject to CALEA. The FBI expresses concern that “any type of illustrative list couldbe considered all-inclusive,” but suggests that if a list is adopted, several additional telecommunications servicesshould be included. FBI Comments at ¶ 24.

74 47 U.S.C. § 1008(b)(1). Section 109(a) of CALEA provides that the Attorney General, subject to the availabilityof appropriations, may agree to pay telecommunications carriers for all reasonable costs directly associated withmodifications performed to comply with section 103 in connection with equipment, facilities, and services installedor deployed on or before January 1, 1995. 47 U.S.C. § 1008(a). Under section 109(d), if a carrier requestspayment in accordance with procedures promulgated pursuant to section 109(e) of CALEA, and the AttorneyGeneral does not agree to pay the carrier for the reasonable costs associated with CALEA compliance forequipment, facilities or services eligible for reimbursement because deployed on or before January 1, 1995, thensuch equipment, facilities or services “shall be considered to be in compliance with the assistance capabilityrequirements of section 103 until the equipment, facility, or service is replaced or significantly upgraded orotherwise undergoes major modification.” 47 U.S.C. § 1008(d)-(e).

75 47 U.S.C. § 1008(b)(1).

76 47 U.S.C. § 1008(b)(2)(A).

77 47 U.S.C. § 1008(b)(2)(B).

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risk of being considered definitive rather than merely illustrative.73 We therefore have decided notto adopt such a list, as we had proposed in the NPRM.

B. Section 109: Requests for Relief Under the “Reasonably Achievable” Standard

30. Background. Section 109(b)(1) of CALEA provides that a telecommunicationscarrier or any other interested person may petition the Commission for a determination regardingwhether compliance with the assistance capability requirements of section 103 of CALEA is“reasonably achievable” with respect to any equipment, facility, or service installed or deployedafter January 1, 1995.74 The Commission must make such a determination, after notice is given tothe Attorney General, within one year after the date on which a petition is filed.75 Under section109(b)(2), if the Commission determines that compliance with the assistance capabilityrequirements of section 103 is not reasonably achievable with respect to any equipment, facility,or service installed or deployed after January 1, 1995, the affected carrier may request theAttorney General to pay for the additional reasonable costs of making compliance reasonablyachievable.76 If the Attorney General declines to pay such costs, the affected carrier will bedeemed to be in compliance with the requirements of section 103.77


78 47 U.S.C. § 1008(b)(1)(A)-(K).

79 NPRM at ¶ 48.

80 47 U.S.C. § 1008(b)(1)(K).

81 NPRM at ¶ 48.

82 Id.

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31. In making determinations as to reasonable achievability under section 109(b) ofCALEA, the Commission must “determine whether compliance would impose significantdifficulty or expense on the carrier or on the users of the carrier's system” and must also considerthe following factors:

A. The effect on public safety and national security;B. The effect on rates for basic residential telephone service;C. The need to protect the privacy and security of communications not authorized to be

intercepted;D. The need to achieve the capability assistance requirements of section 103 by cost-

effective methods;E. The effect on the nature and cost of the equipment, facility, or service at issue;F. The effect on the operation of the equipment, facility, or service at issue;G. The policy of the United States to encourage the provision of new technologies and

services to the public;H. The financial resources of the telecommunications carrier;I. The effect on competition in the provision of telecommunications services;J. The extent to which the design and development of the equipment, facility, or service

was initiated before January 1, 1995;K. Such other factors as the Commission determines are appropriate.78

32. In the NPRM, we requested comment on these factors and the extent to which theCommission should consider specific factors when determining whether or not compliance withCALEA's assistance capability requirements is reasonably achievable.79 Because section109(b)(1)(K) allows the Commission to consider “such other factors as the Commissiondetermines are appropriate,”80 we also requested comment on what additional factors theCommission should consider in making such determinations, and why.81 We asked commenters tostate how such additional factors would be consistent with the intent of CALEA, and how thosefactors should be balanced against the explicit criteria contained in CALEA section 109(b)(1).82


83 See, e.g., BellSouth Comments at 17; AT&T Comments at 8, Reply Comments at 4-5; Ameritech ReplyComments at 12-13; Nextel Reply Comments at 6-7; PrimeCo Reply Comments at 7.

84 FBI Comments at ¶ 96. A number of commenters voice opposition to this suggestion. See AirTouch ReplyComments at 13-14; CDT Reply Comments at 4-5; Nextel Reply Comments at 6-7; PrimeCo Reply Comments at7; AT&T Reply Comments at 5.

85 Motorola, for example, urges the Commission to assign the greatest weight to factors such as the need to achievethe capability assistance requirements of CALEA by cost-effective methods; the effect of compliance on the natureand cost of equipment, facilities, and services; and the effect of compliance on the operation of equipment,facilities, and services. Motorola Comments at 10. TIA, citing the language of section 109(b), contends that theCommission should give significant weight to those factors “that may add to the difficulty or expense imposed onthe carrier or users of the network.” TIA Comments at 8.

86 USTA identifies these factors as the effect of compliance on rates for basic residential telephone service; the needto protect the privacy and security of communications not authorized to be intercepted; the effect of compliance onthe nature and cost of the equipment, facility, or service at issue; the effect of compliance on the operation of theequipment, facility, or service at issue; the financial resources of the telecommunications carrier; and the effect ofcompliance on competition in the provision of telecommunications services. USTA Comments at 12.

87 While stating that Congress intended the Commission to balance all of the section 109(b) factors, CDT urges theCommission “to protect the telecommunications privacy interests of the American public.” CDT Comments at 4-7,Reply Comments at 4-5. See also ACLU Comments at 2, 12; AT&T Comments at 13; CTIA Comments at 15.

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33. Comments. Commenters express widely divergent views regarding how theCommission should evaluate reasonable achievability petitions under section 109(b) of CALEAand the relative weight the Commission should give to each of the factors set forth in that section. While a number of commenters advocate a “balanced” approach that would give equal weight toall the factors in section 109(b)(1),83 others argue that certain factors should be accorded specialsignificance. The FBI, for example, urges the Commission to give “paramount consideration” tothe effect of compliance on public safety and national security,”84 while certain industrycommenters stress the importance of technical and economic factors85 or factors that have animpact on consumers.86 Other commenters emphasize that the Commission should protectprivacy interests.87

34. A number of commenters suggest additional factors for the Commission to considerwhen making a reasonable achievability determination. Several commenting parties urge us toinclude the lack of section 103 standards and commercially available CALEA-compliant hardwareor software, and of section 104 capacity requirements, as preliminary factors that would


88 See, e.g., AT&T Comments at 6, Reply Comments at 2-4, 8-10; BellSouth Comments at 17; PCIA Comments at5-6; PrimeCo Comments at 4; SBC Comments at 26-27; USCC Comments at 3; U.S. West Comments at 40-43,Reply Comments at 21-23; GTE Reply Comments at 4-5; TIA Reply Comments at 19. See also CTIA Commentsat 12; PageNet Comments at 11-13. Section 104 of CALEA requires that telecommunications carriers comply withcapacity requirements established by the Attorney General after consultation with state and local law enforcementagencies, telecommunications carriers, providers of telecommunications support services, and manufacturers oftelecommunications equipment. 47 U.S.C. § 1003. “Capacity” concerns the question of how many simultaneouslaw enforcement intercepts carriers must be prepared to accommodate.

89 BellSouth Comments at 17-18. In March 1998, after the comment cycle for this proceeding had closed, the FBIissued, pursuant to notice and comment rulemaking procedures, a final notice of capacity requirements. Implementation of Section 104 of the Communications Assistance for Law Enforcement Act, Final Notice ofCapacity, 63 Fed. Reg. 12218 (DoJ/FBI, March 12, 1998). See also Initial Notice of Capacity, 60 Fed. Reg. 53643(DoJ/FBI, October 16, 1995), and Second Notice of Capacity, 62 Fed. Reg. 1902 (DoJ/FBI, January 14, 1997). Thepurpose of the capacity notice, which would take effect three years after date of publication, was to specify thecapacity that carriers must install, subject to government reimbursement. A lawsuit has been filed in federaldistrict court alleging that the FBI's March 1998 capacity notice does not satisfy the requirements of CALEA. Cellular Telecommunications Industry Assoc. v. Reno, Civil Actions 1:98CV01036, 1:98CV02010 (D.D.C. filedApr. 27, 1998) (CTIA v. Reno).

90 BellSouth Comments at 18.

91 SBC Comments at 27. OPASTCO also suggests that the Commission establish an additional factor stating that“the compliance of equipment, facilities, and services installed or deployed since January 1, 1995, but prior tomanufacturers' commercial release of CALEA solutions, is not reasonably achievable.” OPASTCO Comments at4.

92 TIA Comments at 8-9, Reply Comments at 19.

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demonstrate that compliance is not reasonably achievable.88 BellSouth recommends that theCommission consider the FBI's failure to issue its final capacity requirements and the likelihood of“some uncertainty resulting from non-industry opposition to the . . . interim trial standard J-STD-025” as two additional section 109 factors.89 BellSouth also argues that “the impact of CALEAcompliance on all telecommunications services, not just basic residential service,” should bedeemed an additional factor.90 SBC proposes not only that the “reasonable availability oftechnology and the implementation cost per affected switch” should be given the status ofadditional factors, but also that those factors should be given “primary weight” in reasonableachievability determinations.91 TIA suggests that the Commission should consider “whether acost incurred by a U.S. carrier to comply with CALEA is similar to that imposed by foreigngovernments for law enforcement assistance,” and “whether an unchallenged industry standard oragreement between the FBI and manufacturers—identifying an agreed-upon set of CALEA-compliant features—exists for a certain telecommunications product.”92 Arguing that all carriers


93 TCG Comments at 10.

94 USTA Comments at 12-13.

95 AT&T Comments at 20. See also CTIA Comments at 22. Discussing extensions of time under section 107(c),CTIA states that the Commission should look to the section 109(b) factors as the basic criteria for granting suchextensions and that the Commission should consider in addition whether or not an intercept could be performedelsewhere (presumably more economically) and “the good faith and diligence of the carrier in working to achieveCALEA compliance.” CTIA Comments at 8-9.

96 Motorola Comments at 9.

97 TIA Comments at 8.

98 AT&T Comments at 21-22; CTIA Comments at 23; US West Reply Comments at 23. But see FBI ReplyComments at ¶ 27 (opposing tolling).

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should receive cost recovery for CALEA-related expenses, TCG contends that a carrier's abilityto obtain rate recovery should be an additional factor for the Commission to consider.93 USTAsuggests that we treat as an additional factor under section 109(K) “whether achievingcompliance would be unreasonable for a smaller carrier because of the disproportionate economicimpact on the carrier.”94 Without proposing specific factors, AT&T interprets subsection K tomean that the enumerated section 109 factors “are not exclusive,” and that “individualizeddeterminations based on unique carrier circumstances” are required in making reasonableachievability determinations.95

35. Motorola asks the Commission explicitly to provide that telecommunicationsequipment manufacturers are “interested part[ies]” for the purposes of filing “reasonableachievability” petitions under section 109 of CALEA.96 TIA makes a similar request on behalf ofmanufacturers and their trade associations.97 In addition, certain commenters argue that the filingof a section 109 petition should toll the CALEA compliance deadline automatically until theCommission acts on the petition.98

36. Conclusions. Before we examine the individual factors of section 109(b) andcommenters' specific ideas and proposals regarding these factors, we make certain generalobservations. First, we note that under the provisions of CALEA the telecommunicationsindustry plays a key role in development of the technological and related standards necessary forcompliance with the statute. As the House Report explains, CALEA “allows industryassociations and standard-setting bodies, in consultation with law enforcement, to establishpublicly available specifications creating ‘safe harbors’ for carriers. This means that those whose



100 47 U.S.C. § 1006(c). We note, for example, that law enforcement is currently conducting discussions withindustry regarding a “flexible CALEA deployment schedule” that involves setting priorities for making switchesCALEA-compliant. The Department of Justice has submitted a letter to the Commission describing thesenegotiations and indicating that the Department might agree to support petitions submitted to the Commissionpursuant to section 107(c) by certain carriers seeking an extension of the CALEA compliance date for deploymentsto service areas that are not high priorities for law enforcement. Letter from Stephen R. Colgate, AssistantAttorney General for Administration, to William E. Kennard, Chairman, Federal Communications Commission,dated June 30, 1999. We agree with the Department that these discussions could be a useful means of ensuringthat those facilities most important to law enforcement are CALEA-compliant in the near term, while alsoreducing costs for carriers. Accordingly, if these discussions result in agreements between law enforcement andindustry on switch prioritization, we intend to give them significant weight in deciding whether to grant extensionsof time under section 107(c) for bringing facilities into compliance with CALEA. 101 47 U.S.C. § 1006(c)(2).

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competitive future depends on innovation will have a key role in interpreting the legislatedrequirements and finding ways to meet them without impeding the deployment of new services.”99 In light of industry's significant role in developing the assistance capability standards of CALEA,we stress that section 109 is to be reserved for the examination of specific carrier complianceproblems, and is not to be used as a vehicle for rearguing the standards that have been establishedfor compliance with section 103.

37. As a preliminary matter, we also recognize that we may receive some petitions forextensions of time to comply with CALEA under section 107(c) of the Act.100 Under section107(c), the Commission may grant an extension of the CALEA compliance deadline "if theCommission determines that compliance with the assistance capability requirements under section103 is not reasonably achievable through application of technology available within thecompliance period."101 To the extent we find it appropriate to grant extensions of time undersection 107(c), it may be necessary to provide relief under section 109 only in unusual cases.

38. Turning to the question of how we should apply the individual factors set forth insection 109, and whether we should consider additional factors, we note that the factors ofsection 109(b) reflect the broad goals that Congress identified in enacting CALEA generally. Asthe House Report states, CALEA “seeks to balance three key policies: (1) to preserve a narrowlyfocused capability for law enforcement agencies to carry out properly authorized intercepts; (2) toprotect privacy in the face of increasingly powerful and personally revealing technologies; and (3)


102 H.R. Rep. No. 103-827(I), at 13, reprinted in 1994 U.S.C.C.A.N. 3489, 3493; see also 140 Cong. Rec. 10771,10781 (Oct. 4, 1994) (comments by Rep. Markey).

103 See, e.g., H.R. Rep. No. 103-827(I), at 30, reprinted in 1994 U.S.C.C.A.N. 3489, 3507.

104 See, e.g., id. at 22, reprinted in 1994 U.S.C.C.A.N. 3489, 3499.

105 See FBI Comments at ¶¶ 94-95. For comments opposing this request, see AT&T Reply Comments at 6-7; CTIAReply Comments at 15-17; Primeco Reply Comments at 6-7; and TIA Reply Comments at 18-19. But see SBCReply Comments at 10.

106 CTIA Comments at 16.

107 USTA Comments at 11-13.

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to avoid impeding the development of new communications services and technologies.”102 In lightof the overall purpose of CALEA to preserve law enforcement's ability to conduct court-authorized surveillance, we find that we must in all cases consider public safety, and, whereapplicable, national security, in our analysis of section 109 petitions. At the same time, given theimportance Congress has placed on the privacy and security of communications that are not thetargets of court-ordered surveillance,103 and the need to ensure that the development of newtechnologies and services is not impeded,104 we also find that those factors involving privacy andinnovation are likely to be important in many cases. However, the technological diversity ofcarrier networks, as well as other carrier characteristics, will, as a matter of course, mean thatcertain factors will be more important to the arguments of certain carriers than others, and not allof the factors enumerated in section 109 may be relevant to the analysis of a given reasonableachievability petition. We therefore find that it would be premature at this point to assign specialweight to any one factor generally or to adopt additional factors.

39. A central concern to many commenters is the issue of how the Commission willapproach the cost of CALEA compliance when evaluating section 109 petitions. The FBIsuggests that we require that individual carriers include in their petitions an estimate of thereasonable costs directly associated with modifications under consideration and, further, that, incases where we find that a modification is not reasonably achievable, we determine what specificportion of the costs is reasonably achievable for the carrier.105 Other cost-related commentsinclude CTIA's suggestion that we determine what a reasonable charge is for CALEA-compliantproducts106 and USTA's recommendation that we perform a cost benefit analysis under section109.107 We find, as a general principle, that, in making judgments under section 109, we will lookonly to the additional cost incurred in making equipment and facilities CALEA compliant. We


108 If, in particular, law enforcement and industry reach agreements regarding switch prioritization that enable usto grant extensions of time under section 107(c) allowing carriers to make certain equipment CALEA compliant aspart of the normal upgrade cycle with resulting low compliance costs, we would expect such compliance generallyto be reasonably achievable. On the other hand, there may be cases in which law enforcement opposes anyextension of time for making particular equipment CALEA compliant, resulting in substantial additional costs to acarrier. In those cases, we could find compliance not to be reasonably achievable.

109 See AT&T Comments at 14-15.

110 Cf. Telephone Number Portability, Third Report and Order, CC Docket No. 95-116, 13 FCC Rcd 11701, ¶¶ 72-75; Telephone Number Portability Cost Classification Proceeding, Memorandum Opinion and Order, CC DocketNo. 95-116, 13 FCC Rcd 24495, ¶¶ 6, 10 (1998) (principles used for identifying costs incurred by incumbent LECsdirectly related to the implementation of telephone number portability).

111 With respect to carrier size, see USTA Comments at 12-13. With respect to geographic location, see AT&TComments at 10; CTIA Comments at 14; USCC Comments at 4.

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anticipate that, in many instances, carriers will become CALEA compliant in the course of generalnetwork upgrades and will recover any additional cost of CALEA compliance through theirnormal charges.108 We also would expect, however, that CALEA solutions that would require acarrier to change vendors in order to purchase costly new switching equipment, or to replacecostly existing facilities, would generally not be deemed reasonably achievable under section109.109 We stress, however, that any petitioner who argues that it is unable to comply withCALEA for reasons of cost must present quantitative cost information that is as detailed, accurateand complete as possible, which we shall analyze along with any technological problems related tothe nature of the equipment, facility, or service at issue. Large carriers with multiple switch typesin networks that cover large or diverse areas may present data on a per switch basis, in order toidentify compliance problems specific to particular segments of the carrier's network.

40. In order to distinguish the additional costs of CALEA compliance from the costs ofgeneral network upgrades, we offer the following guidance to carriers in identifying the cost ofCALEA compliance. In our view, costs are related to CALEA compliance only if carriers canshow that these costs would not have been incurred by the carrier but for the implementation ofCALEA. For instance, costs incurred as an incidental consequence of CALEA compliance arenot directly related to CALEA compliance and should be excluded from the carrier's showing. Finally, general overhead costs cannot be allocated to CALEA compliance, only additionaloverheads incremental to and resulting from CALEA compliance.110

41. We agree as a general matter with those commenters that argue that carrier size andgeographic location may be significant considerations under section 109.111 However, if law


112 47 U.S.C. § 1008(b)(1). See also AT&T Comments at 11-12; CTIA Comments at 14-15.

113 47 U.S.C. § 1008(b)(1)(B). See H.R. Rep. No. 103-827(I), at 49-50, reprinted in 1994 U.S.C.C.A.N. 3489,3515 (statement of Rep. Edwards and Rep. Boucher). We also note that under section 107(b) one of the factorsthat the Commission is to consider in establishing technical requirements or standards is minimizing the cost ofcompliance on residential ratepayers. 47 U.S.C. § 1006(b)(3).

114 See AT&T Comments at 11-13; CTIA Comments at 14-15.

115 See AT&T Comments at 15; CTIA Comments at 17.

116 See AT&T Comments at 16-17; CTIA Comments at 17.

117 See AT&T Comments at 17; CTIA Comments at 18-19.

118 See AT&T Comments at 17.

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enforcement and the telecommunications industry agree on a flexible CALEA deploymentschedule that results in an extension of the current compliance deadline for equipment andfacilities in areas that are not high priorities for law enforcement, we do not expect many smallrural carriers to need relief under section 109.

42. Further, we believe that in implementing section 109 we should seek to minimize anyadverse effects of CALEA compliance on quality of service and subscriber rates. This approach isconsistent with the Congressional mandate to the Commission in section 109(b)(1) to determine“whether compliance would impose significant difficulty or expense on the carrier or the users ofthe carrier's systems . . . .”112 Moreover, the same section specifically directs the Commission toconsider the effect of compliance on rates for “basic residential telephone service,” reflecting aspecial Congressional concern about rate impacts for that service.113 However, we find that thearguments in this record that CALEA compliance will increase rates,114 affect quality of service,115

make particular technologies and services unprofitable,116 prevent the introduction of services tothe market,117 or price services out of the reach of certain groups of customers,118 are at this pointinherently speculative. Any such arguments made in individual petitions under section 109 will begiven substantial weight only to the extent they are made with particularity and are grounded onspecific quantitative data.

43. The Commission may consider the financial resources of individualtelecommunications carriers under section 109(b)(1)(H), and industrywide competitive pressures


119 47 U.S.C. § 1008(b)(1)(H)-(I); see also CTIA Comments at 19-20.

120 AT&T Comments at 17-19; CTIA Comments at 19-21.

121 See AT&T Comments at 17.

122 Extension Order at ¶ 1.

123 Standards Further Notice at ¶ 47.

124 Third Report and Order, at ¶ 129. Because the Third Report and Order applies only to wireline, cellular, andPCS providers, that Order does not cover other providers that must be CALEA-compliant by June 30, 2000. However, all providers that meet the definition of “telecommunications carrier” must meet this deadline. It is ourunderstanding that industry associations are currently developing safe harbor provisions for at least some of thoseproviders, which will be proposed for adoption in advance of the compliance date.

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under section 109(b)(1)(I), in its evaluations of section 109 petitions.119 AT&T and CTIA expressconcern regarding the expense of CALEA for wireless carriers in particular.120 We stress againthat requests for relief based on such factors must be supported by carrier- or industry-specificfacts, including quantitative data. We find, contrary to AT&T's assertion, that specialconsideration for a new market entrant would not necessarily be tantamount to an unfairsubsidy.121

44. A number of commenters have argued forcefully that the delay in establishingassistance capability standards and capacity requirements is an important factor for theCommission to consider in making reasonable achievability determinations. On September 11,1998, the Commission issued a Memorandum Opinion and Order granting industry a 20-monthblanket extension of the CALEA compliance deadline until June 30, 2000, under Section 107 ofthe statute.122 In our November 5, 1998 Further NPRM, we stated that we would considergranting an additional extension for compliance by telecommunications carriers with anyadditional technical requirements the Commission eventually approves.123 The Third Report andOrder, adopted contemporaneously with this Order, extends until September 30, 2001, thedeadline for additional technical requirements for wireline, cellular and PCS providers.124 In lightof these circumstances, we find that any petitioner who seeks relief under section 109 on the basisof the delay in the adoption of assistance capability standards must present carrier- or equipment-specific facts demonstrating that such delay actually has made CALEA compliance infeasible. Asfor any alleged lack of CALEA-compliant software and hardware on the market, we will takesuch claims into consideration in evaluating section 109 petitions, but only if raised with sufficientspecificity and supported with a particularized showing. We decline to adopt AT&T's proposalthat we place a specific burden on law enforcement to demonstrate that equipment or facilities


125 See AT&T Comments at 8-9.

126 See supra notes 88-89. See also Implementation of Section 104 of the Communications Assistance to LawEnforcement Act: Telecommunications Services Other than Local Exchange Services, Cellular, and BroadbandPCS, Notice of Inquiry, 63 Fed. Reg. 70,160 (1998).

127 47 U.S.C. § 1008(b)(1)(J).

128 AT&T Comments at 19-20; CTIA Comments at 21-22. See also OPASTCO Comments at 4-5 and SBCComments at 27-28. But see FBI Reply Comments at ¶ 27 n. 39 (opposing commenters' attempt to revisit thedefinition). The FBI's final cost recovery rules are set forth at 28 C.F.R. §§ 100.9-100.21. The FBI's definition inits rules of “installed or deployed” is found at 28 C.F.R. § 100.10.

129 47 U.S.C. 1008(e)(2).

130 We note that the definition of "installed or deployed" is a central issue in CTIA v. Reno, a pending lawsuitinitiated by CTIA, PCIA, and TIA to challenge the FBI's capacity requirements and final cost recovery rules. Seesupra note 89. USTA has also joined the suit. The court has stayed this litigation a number of times, withoutobjection from any party to the lawsuit, in order to allow for negotiations between the FBI and industry regarding aflexible CALEA deployment schedule, which is discussed above at note 100. The most recent stay was issued on

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have been used for criminal activity in cases where reasonable achievability petitions are filedbefore CALEA-compliant hardware or software is available.125 With respect to the FBI's delay inissuing capacity requirements, we note that requirements for wireline, cellular, and broadbandPCS were issued on March 12, 1998—more than 27 months in advance of the revised June 30,2000 CALEA compliance deadline.126 Accordingly, there has been ample time for industry toevaluate these requirements, and we do not expect to grant section 109 petitions on the basis ofthe timing of their issuance.

45. Pursuant to section 109(b)(J), we will consider the extent to which the design anddevelopment of equipment was initiated before January 1, 1995, to the extent appropriate in ourexamination of section 109 petitions.127 In commenting on section 109(b)(1)(J), certain partiesargue as well that the definition of “installed or deployed” adopted by the FBI as part of its costrecovery rules is excessively narrow in restricting its application to equipment, facilities, andservices “operable and available for use” by a carrier’s customers by January 1, 1995.128 Undersection 109(e) of the Act, the Attorney General is vested with the responsibility for establishingcost control regulations governing the Federal Government's payment of costs associated withbringing equipment installed or deployed on or before January 1, 1995, into compliance withCALEA. The Commission is assigned only a consultatory role with respect to such cost controlregulations.129 We therefore find that it is not within the Commission's authority to adopt rulesdefining “installed or deployed.”130


July 29, 1999, for 60 days.

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46. We recognize the status of equipment manufacturers and their associations asinterested parties to this proceeding, and therefore will allow them to file section 109 petitions. We decline to toll the CALEA compliance deadline automatically upon the filing of a section 109petition. Such tolling would be tantamount to an automatic extension of the deadline, which maynot be appropriate in all cases.

IV. PROCEDURAL MATTERS

47. This action is taken pursuant to Sections 1, 2, 4(i), 201(a), 229, 301, 303 and 332(c)of the Communications Act of 1934, 47 U.S.C. §§ 151, 152, 154(i), 201(a), 229, 301, 303,332(c)(1)(B).

V. ORDERING CLAUSES

48. Accordingly, IT IS ORDERED that the Regulatory Flexibility Analysis, as requiredby Section 604 of the Regulatory Flexibility Act and as set forth in Appendix B, is adopted.

49. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs,Reference Operations Division, SHALL SEND a copy of this SECOND REPORT ANDORDER, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacyof the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman SalasSecretary


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APPENDIX A — List of Commenters

Comments:

AirTouch Communications, Inc. (AirTouch)American Civil Liberties Union; Electronic Privacy Information Center; and Electronic

Frontier Foundation (ACLU)American Mobile Telecommunications Association, Inc. (AMTA)Ameritech Operating Companies (Ameritech)AT&T Corp. (AT&T)Bell Atlantic Mobile, Inc. (Bell Atlantic)BellSouth Corporation (BellSouth)Cellular Telecommunications Industry Association (CTIA)Center for Democracy and Technology; Electronic Frontier Foundation; and Computer

Professionals for Social Responsibility (CDT)GlobeCast North America Incorporated (GlobeCast)GTE Service Corporation (GTE)Metricom, Inc. (Metricom)Motorola, Inc. (Motorola)National Telephone Cooperative Association (NTCA)Nextel Communications, Inc. (Nextel)Omnipoint Communications, Inc. (Omnipoint)Organization for the Promotion and Advancement of Small Telecommunications Companies

(OPASTCO)Paging Network, Inc. (PageNet)Personal Communications Industry Association (PCIA)Powertel, Inc. (Powertel)PrimeCo Personal Communications, L.P. (PrimeCo)Rural Telecommunications Group (RTG)SBC Communications Inc. (SBC)Southern Communications Services, Inc. (Southern)Sprint Spectrum L.P. (Sprint)Telecommunications Industry Association (TIA)Teleport Communications Group Inc. (TCG)360N Communications Company (360)United States Cellular Corporation (USCC)United States Telephone Association (USTA)U.S. Department of Justice, Federal Bureau of Investigation (FBI)


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U S WEST, Inc. (US West)

Reply Comments:

AirTouch Communications, Inc.American Civil Liberties Union; Electronic Privacy Information Center; Electronic

Frontier Foundation; and Computer Professionals for Social ResponsibilityAmeritech Operating CompaniesAT&T Corp.BellSouth CorporationCellular Telecommunications Industry AssociationCenter for Democracy and Technology; Computer Professionals for Social ResponsibilityGTE Service CorporationICO Services LimitedMetricom, Inc.Mobex Communications, Inc.Motorola, Inc.Nextel Communications, Inc.Omnipoint Communications, Inc.Personal Communications Industry AssociationPrimeCo Personal Communications, L.P.SBC Communications Inc.Southern Communications Services, Inc.Telecommunications Industry AssociationTeleport Communications Group Inc.United States Telephone AssociationU S WEST, Inc.U.S. Department of Justice, Federal Bureau of Investigation

Informal Comments:

Connecticut State PoliceIllinois State PoliceIndiana State PoliceNew Jersey Department of Law and Public SafetyOffice of the Hudson County (New Jersey) ProsecutorOcean County (New Jersey) ProsecutorCity of New York Police Department


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Chattanooga (Tennessee) Police DepartmentEast Ridge (Tennessee) Police DepartmentHamilton County (Tennessee) District AttorneyTexas Department of Public SafetyU.S. Department of Justice, Drug Enforcement AdministrationU.S. Department of the Treasury, U.S. Customs ServiceU.S. Postal Service, Office of the Inspector GeneralNational Technical Investigators' Association


1 See 5 U.S.C. § 603. The RFA, 5 U.S.C. § 601 et seq., has been amended by the Contract with AmericaAdvancement Act, Pub. L.No. 104-121, 110 Stat. 847 (1996)(CWAAA). Title II of the CWAAA is the SmallBusiness Regulatory Enforcement Fairness Act of 1996 (SBREFA).

2 Communications Assistance for Law Enforcement Act, Notice of Proposed Rulemaking, CC Docket No. 97-213,13 FCC Rcd 3149, 3184-94 (1997) (NPRM).

3 See 5 U.S.C. § 604.

4 47 U.S.C. § 229.

5 Pub. L. No. 103-414, 108 Stat. 4279 (1994) (codified as amended in sections of 18 U.S.C. and 47 U.S.C.)(CALEA or the Act).

6 CALEA, supra, at preamble.

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APPENDIX B — Final Regulatory Flexibility Analysis

1. As required by the Regulatory Flexibility Act (RFA),1 an Initial Regulatory FlexibilityAnalysis (IRFA) was incorporated in the Notice of Proposed Rulemaking in this proceeding.2 The Commission sought written public comment on the proposals in the NPRM, including theIRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.3

(a) Need for and Purpose of this Action

2. In this Second Report and Order, the Commission, in compliance with 47 U.S.C. § 229,4 promulgates policies implementing the Communications Assistance for Law EnforcementAct.5 In enacting CALEA, Congress sought to “make clear a telecommunications carrier's duty tocooperate in the interception of communications for law enforcement purposes . . . .”6 ThisSecond Report and Order addresses in particular certain issues relevant to sections 102 and 109of CALEA: (1) the definition of “telecommunications carrier” set forth in section 102, whichdetermines which entities and services are subject to the assistance capability and otherrequirements of CALEA; and (2) the factors the Commission will consider in makingdeterminations under section 109 of the Act as to whether compliance with CALEA is reasonablyachievable for particular carriers.

3. The policies adopted in this Second Report and Order implement Congress's goal ofensuring that telecommunications carriers support the lawful electronic surveillance needs of law


7 H.R. Rep. 103-827(I), at 16 (1994), reprinted in 1994 U.S.C.C.A.N. 3489, 3493.

8 NPRM at ¶¶ 54-76.

9 Communications Assistance for Law Enforcement Act, Report and Order, CC Docket 97-213, FCC 99-11 (rel.Mar. 15, 1999), recon. sua sponte, Order on Reconsideration, FCC 99-184 (rel. Aug. 2, 1999).

10 See, e.g., AMTA Comments at 4-8; Nextel Comments at 6-7.

11 See, e.g., USTA Comments at 12-13.

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enforcement agencies as telecommunications technologies evolve. These policies promote thethree key policies Congress sought to balance in enacting CALEA: “(1) to preserve a narrowlyfocused capability for law enforcement agencies to carry out properly authorized intercepts; (2) toprotect privacy in the face of increasingly powerful and personally revealing technologies; and (3)to avoid impeding the development of new communications services and technologies.”7

(b) Summary of the Issues Raised by Public Comments Made in Response to the IRFA

4. In the NPRM, the Commission asked for comments that specifically addressed issuesraised in the IRFA.8 The IRFA focused on proposed reporting, recordkeeping and othercompliance requirements relating primarily to sections 105 and 107 of CALEA. These matters lieoutside the immediate scope of this Second Report and Order, which is limited to clarifying whatentities, services, and facilities are subject to CALEA (pursuant to section 102) and examining thefactors the Commission will consider when determining if compliance with CALEA's assistancecapability requirements is reasonably achievable (pursuant to section 109). Only one party,BellSouth Corporation, filed comments directly responding to the IRFA, but its comments on theIRFA relate to the Commission's proposed system security and integrity regulations. These issueswere dealt with in an earlier order rather than in this Second Report and Order, and BellSouth'scomments were addressed therein.9 Many parties, however, submitted comments on theCommission's proposals affecting small businesses set forth in the NPRM. These includedrequests that we exempt certain categories of telecommunications carriers from the assistancecapability requirements, based on their limited operations or the burden of implementing thefacility changes necessary to meet the requirements,10 and that in considering whether complianceis reasonably achievable, we attach special significance to the economic impact on “smallercarrier[s].”11 We summarize our action on these comments below.


12 5 U.S.C. § 603(b)(3).

13 Id. § 601(6). 14 5 U.S.C. § 601(3) (incorporating by reference the definition of “small business concern” in 15 U.S.C. § 632). Pursuant to the RFA, the statutory definition of a small business applies “unless an agency, after consultation withthe Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishesone or more definitions of such term which are appropriate to the activities of the agency and publishes suchdefinition(s) in the Federal Register.” 5 U.S.C. § 601(3).

15 Small Business Act, 15 U.S.C. § 632.

16 5 U.S.C. § 601(4).

17 1992 Economic Census, Bureau of the Census, U.S. Dept. of Commerce, Table 6 (special tabulation of dataunder contract to Office of Advocacy of the U.S. Small Business Administration).

18 5 U.S.C. § 601(5).

19 1992 Census of Governments, Bureau of the Census, U.S. Dept. of Commerce.

20 Id.

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(c) Description and Estimate of the Number of Small Entities to Which the Actions Taken May Apply:

5. The RFA directs agencies to provide a description of and, where feasible, an estimateof the number of small entities that may be affected by the action taken.12 The RFA generallydefines the term “small entity” as having the same meaning as the terms “small business,” “smallorganization,” and “small governmental jurisdiction.”13 In addition, the term “small business”hasthe same meaning as the term “mall business concern”under the Small Business Act.14 A smallbusiness concern is one that: (1) is independently owned and operated; (2) is not dominant in itsfield of operation; and (3) satisfies any additional criteria established by the Small BusinessAdministration (SBA).15 A small organization is generally “any not-for-profit enterprise which isindependently owned and operated and is not dominant in its field.”16 Nationwide, as of 1992,there were approximately 275,801 small organizations.17 And finally, “small governmentaljurisdiction” generally means “governments of cities, counties, towns, townships, villages, schooldistricts, or special districts, with a population of less than 50,000.”18 As of 1992, there wereapproximately 85,006 such jurisdictions in the United States.19 This number includes 38,978counties, cities, and towns; of these, 37,566, or 96 percent, have populations of fewer than50,000.20 The United States Bureau of the Census (Census Bureau) estimates that this ratio isapproximately accurate for all governmental entities. Thus, of the 85,006 governmental entities,


21 15 U.S.C. § 632. See, e.g., Brown Transport Truckload, Inc. v. Southern Wipers, Inc., 176 B.R. 82 (N.D. Ga.1994).

22 13 C.F.R. § 121.201.

23 1992 Census of Transportation, Communications, and Utilities: Establishment and Firm Size, Bureau of theCensus, U.S. Dept. of Commerce, at Firm Size 1-123 (1995) (1992 Census).

24 15 U.S.C. § 632(a)(1).

25 Carrier Locator: Interstate Service Providers, Fig. 1 (Jan. 1999) (Carrier Locator). See also 47 C.F.R. § 64.601-.608.

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we estimate that 81,600 (91 percent) are small entities. Below, we further describe and estimatethe number of small business concerns that may be affected by the actions taken in this SecondReport and Order.

6. As noted, under the Small Business Act, a “small business concern” is one that: (1) isindependently owned and operated; (2) is not dominant in its field of operation; and (3) meets anyadditional criteria established by the SBA.21 The SBA has defined a small business for StandardIndustrial Classification (SIC) categories 4812 (Radiotelephone Communications) and 4813(Telephone Communications, Except Radiotelephone) to be small entities when they have nomore than 1,500 employees.22 We first discuss the number of small telecommunications entitiesfalling within these SIC categories, then attempt to refine further those estimates to correspondwith the categories of telecommunications companies that are commonly used under our rules.

7. Total Number of Telecommunications Entities Affected. The Census Bureau reportsthat, at the end of 1992, there were 3,497 firms engaged in providing telephone services, asdefined therein, for at least one year.23 This number contains a variety of different categories ofentities, including local exchange carriers, interexchange carriers, competitive access providers,cellular carriers, mobile service carriers, operator service providers, pay telephone operators, PCSproviders, covered SMR providers, and resellers. It seems certain that some of those 3,497telephone service firms may not qualify as small entities or small incumbent LECs because theyare not “independently owned and operated.”24 For example, a PCS provider that is affiliatedwith an interexchange carrier having more than 1,500 employees would not meet the definition ofa small business. It seems reasonable to conclude, therefore, that fewer than 3,497 telephoneservice firms are small entity telephone service firms or small incumbent LECs that may beaffected by the actions taken in this Second Report and Order.

8. The most reliable source of current information regarding the total numbers ofcommon carrier and related providers nationwide, including the numbers of commercial wirelessentities, appears to be data the Commission publishes annually in its Carrier Locator report,derived from filings made in connection with the Telecommunications Relay Service (TRS).25


26 Carrier Locator at Fig. 1.

27 5 U.S.C. § 601(3).

28 Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC (May27, 1999). The Small Business Act contains a definition of “small business concern,” which the RFA incorporatesinto its own definition of “small business.” See 15 U.S.C. § 632(a) (Small Business Act); 5 U.S.C. § 601(3)(RFA). SBA regulations interpret “small business concern” to include the concept of dominance on a nationalbasis. 13 C.F.R. § 121.102(b). Since 1996, out of an abundance of caution, the Commission has included smallincumbent LECs in its regulatory flexibility analyses. Implementation of the Local Competition Provisions of theTelecommunications Act of 1996, CC Docket, 96-98, First Report and Order, 11 FCC Rcd 15499, 16144-45(1996).

29 1992 Census, supra, at Firm Size 1-123.

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According to data in the most recent report, there are 3,604 interstate carriers.26 These include,inter alia, local exchange carriers, wireline carriers and service providers, interexchange carriers,competitive access providers, operator service providers, pay telephone operators, providers oftelephone toll service, providers of telephone exchange service, and resellers.

9. We have included small incumbent local exchange carriers (LECs) in this RFA analysis. As noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent smallbusiness size standard (e.g., a telephone communications business having 1,500 or feweremployees), and “is not dominant in its field of operation.”27 The SBA's Office of Advocacycontends that, for RFA purposes, small incumbent LECs are not dominant in their field ofoperation because any such dominance is not “national” in scope.28 We have therefore includedsmall incumbent LECs in this RFA analysis, although we emphasize that this RFA action has noeffect on FCC analyses and determinations in other, non-RFA contexts.

10. Wireline Carriers and Service Providers (SIC 4813). The Census Bureau reportsthat there were 2,321 telephone communications companies other than radiotelephone companiesin operation for at least one year at the end of 1992.29 All but 26 of the 2,321 non-radiotelephonecompanies listed by the Census Bureau were reported to have fewer than 1,000 employees. Thus,even if all 26 of those companies had more than 1,500 employees, there would still be 2,295 non-radiotelephone companies that might qualify as small entities or small incumbent LECs. Althoughit seems certain that some of these carriers are not independently owned and operated, we areunable at this time to estimate with greater precision the number of wireline carriers and serviceproviders that would qualify as small business concerns under SBA's definition. Consequently, weestimate that there are fewer than 2,295 small entity telephone communications companies otherthan radiotelephone companies that may be affected by the actions taken in this Second Reportand Order.


30 13 C.F.R. § 121.210, SIC Code 4813.

31 See 47 C.F.R. § 64.601 et seq.; Carrier Locator at Fig. 1.

32 Carrier Locator at Fig. 1. The total for resellers includes both toll resellers and local resellers. The TRScategory for CAPs also includes competitive local exchange carriers (CLECs) (total of 129 for both).

33 1992 Census, supra, at Firm Size 1-123.

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11. Local Exchange Carriers, Interexchange Carriers, Competitive Access Providers,and Resellers. Neither the Commission nor SBA has developed a definition of small LECs,interexchange carriers (IXCs), competitive access providers (CAPs), or resellers. The closestapplicable definition for these carrier-types under SBA rules is for telephone communicationscompanies other than radiotelephone (wireless) companies.30 The most reliable source ofinformation regarding the number of these carriers nationwide of which we are aware appears tobe the data that we collect annually in connection with the TRS.31 According to our most recentdata, there are 1,410 LECs, 151 IXCs, 129 CAPs, and 351 resellers.32 Although it seems certainthat some of these carriers are not independently owned and operated, or have more than 1,500employees, we are unable at this time to estimate with greater precision the number of thesecarriers that would qualify as small business concerns under SBA's definition. Consequently, weestimate that there are fewer than 1,410 small entity LECs or small incumbent LECs, 151 IXCs,129 CAPs, and 351 resellers that may be affected by the actions taken in this Second Report andOrder.

12. Wireless Carriers (SIC 4812). The Census Bureau reports that there were 1,176radiotelephone (wireless) companies in operation for at least one year at the end of 1992, ofwhich 1,164 had fewer than 1,000 employees.33 Even if all of the remaining 12 companies hadmore than 1,500 employees, there would still be 1,164 radiotelephone companies that mightqualify as small entities if they are independently owned are operated. Although it seems certainthat some of these carriers are not independently owned and operated, we are unable at this timeto estimate with greater precision the number of radiotelephone carriers and service providers thatwould qualify as small business concerns under SBA's definition. Consequently, we estimate thatthere are fewer than 1,164 small entity radiotelephone companies that may be affected by theactions taken in this Second Report and Order.

13. Cellular, PCS, SMR and Other Mobile Service Providers. In an effort to furtherrefine our calculation of the number of radiotelephone companies that may be affected by theactions taken in this Second Report and Order, we consider the data that we collect annually inconnection with the TRS for the subcategories Wireless Telephony (which includes PCS, Cellular,and SMR) and Other Mobile Service Providers. Neither the Commission nor the SBA hasdeveloped a definition of small entities specifically applicable to these broad subcategories, so we


34 Id. To the extent that the Commission has adopted definitions for small entities in connection with the auctionof particular wireless licenses, we discuss those definitions below. 35 Carrier Locator at Fig. 1.

36 47 C.F.R. § 24.720(b)(1).

37 Implementation of Section 309(j) of the Communications Act—Competitive Bidding, PP Docket No. 93-253,Fifth Report and Order, 9 FCC Rcd 5532, 5581-84 (1994).

38 47 C.F.R. §§ 90.814(b)(1) and 90.912(b)(1). See Amendment of Parts 2 and 90 of the Commission's Rules toProvide for the Use of 200 Channels Outside the Designated Filing Areas in the 896-901 MHz and the 935-940MHz Bands Allotted to the Specialized Mobile Radio Pool, PR Docket No. 89-583, Second Order onReconsideration and Seventh Report and Order, 11 FCC Rcd 2639, 2693-702 (1995); Amendment of Part 90 of theCommission's Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PRDocket No. 93-144, First Report and Order, Eighth Report and Order, and Second Further Notice of ProposedRulemaking, 11 FCC Rcd 1463 (1995).

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will utilize the closest applicable definition under SBA rules, which is for radiotelephonecommunications companies.34 According to our most recent TRS data, 732 companies reportedthat they are engaged in the provision of Wireless Telephony services and 23 companies reportedthat they are engaged in the provision of Other Mobile Services.35 Although it seems certain thatsome of these carriers are not independently owned and operated, or have more than 1,500employees, we are unable at this time to estimate with greater precision the number of WirelessTelephony Providers and Other Mobile Service Providers, except as described below, that wouldqualify as small business concerns under SBA's definition. Consequently, we estimate that thereare fewer than 732 small entity Wireless Telephony Providers and fewer than 23 small entityOther Mobile Service Providers that might be affected by the actions taken in this Second Reportand Order.

14. Broadband PCS Licensees. The broadband PCS spectrum is divided into sixfrequency blocks designated A through F, and the Commission has held auctions for each block. The Commission defined “small business” for Blocks C and F as an entity that has average grossrevenues of not more than $40 million in the three previous calendar years.36 These regulationsdefining “small business” in the context of broadband PCS auctions have been approved bySBA.37 No small businesses within the SBA-approved definition bid successfully for licenses inBlocks A and B. There have been 237 winning bidders that qualified as small entities in the fourauctions that have been held for licenses in Blocks C, D, E and F, all of which may be affected bythe actions taken in this Second Report and Order.

15. SMR Licensees. The Commission has defined “small business” in auctions forgeographic area SMR licenses as a firm that had average annual gross revenues of not more than$15 million in the three previous calendar years, and the SBA has approved this definition.38 The



40 1992 Census, supra, UC92-S-1, Subject Series, Establishment and Firm Size, Table 5, Employment Size ofFirms; 1992, SIC code 4812 (issued May 1995).

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actions taken in this Second Report and Order may apply to SMR providers that either acquiredgeographic area licenses through auction or held licenses before the auctions. We do not havedata reflecting the total number of firms holding pre-auction licenses, nor how many of theseproviders have annual revenues of less than $15 million. Consequently, for purposes of thisFRFA, we estimate that all of the pre-auction SMR authorizations may be held by small entities,some of which may be affected by the actions taken in this Second Report and Order.

16. The Commission has held two auctions for geographic area SMR licenses. Sixtywinning bidders in the 900 MHz auction qualified as small entities, and 38 in the 800 MHzauction. Based on this information, we estimate that the number of geographic area SMRlicensees that may be affected by the actions taken in this Second Report and Order includes these98 small entities. An additional 230 channels in the lower portion of the 800 MHz SMR band willbe made available in a future auction. However, the Commission has not yet determined howmany licenses will be offered, and thus at this time there is no basis on which to estimate howmany small entities may win these licenses. Given that nearly all radiotelephone companies havefewer than 1,000 employees and that no reliable estimate of the number of prospective 800 MHzlicensees can be made, we estimate, for purposes of this FRFA, that all of the licenses may beawarded to small entities, some of which may be affected by the actions taken in this SecondReport and Order.

17. 220 MHz Radio Service. The 220 MHz service has both Phase I and Phase IIlicenses. There are approximately 1,515 Phase I non-nationwide licensees and four nationwidelicensees currently authorized to operate in the 220 MHz band. The Commission has notdeveloped a definition of small entities specifically applicable to such incumbent 220 MHz Phase Ilicensees. To estimate the number of such licensees that are small businesses, we apply thedefinition under the SBA rules applicable to radiotelephone communications companies.39 According to the Census Bureau, only 12 radiotelephone firms out of a total of 1,176 such firmswhich operated during 1992 had 1,000 or more employees.40 Therefore, if this general ratiocontinues to 1999 in the context of Phase I 220 MHz licensees, we estimate that nearly all suchlicensees are small businesses under the SBA's definition.

18. The Phase II 220 MHz service is a new service, and is subject to spectrum auctions. In the 220 MHz Third Report and Order we adopted criteria for defining small businesses for


41 220 MHz Third Report and Order, PR Docket No. 89-552, 12 FCC Rcd 10943, 11068-70, ¶¶ 291-295 (1997). The SBA has approved these definitions. See Letter from A. Alvarez, Administrator, SBA, to D. Phythyon, Chief,Wireless Telecommunications Bureau, FCC (Jan. 6, 1998).

42 47 C.F.R. § 90.1021(b). See also 220 MHz Third Report and Order, supra, 12 FCC Rcd at 11068-69, ¶ 291.

43 See Future Development of Paging Systems, Second Report and Order and Further Notice of ProposedRulemaking, WT Docket 96-18, 12 FCC Rcd 2732, 2863 (1997).

44 Public Notice, “Auction of 929 and 931 MHz Paging Service Spectrum,” Report No. AUC-99-26-B, DA No. 99-1591 (Wireless Telecom. Bur. Aug. 12, 1999).

45 See Letter from A. Alvarez, Administrator, SBA, to A.J. Zoslov, Chief, Auctions Division, WirelessTelecommunications Bureau, FCC (Dec. 2, 1998).

46 See Future Development of Paging Systems, Second Report and Order and Further Notice of ProposedRulemaking, WT Docket 96-18, 12 FCC Rcd 2732, 2863-64 (1997).

47 Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report andAnalysis of Competitive Market Conditions With Respect to Commercial Mobile Services, Third Report, FCC 98-9, at 40 (June 11, 1998) (Third CMRS Competition Report).

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purposes of determining their eligibility for special provisions such as bidding credits.41 We havedefined a small business as an entity that has average gross revenues not exceeding $15 million forthe preceding three years.42 The Commission has held two auctions for Phase II 220 MHzlicenses, and in them 53 entities that qualified as small or very small entities were winning bidders.

19. Paging. The Wireless Telecommunications Bureau has announced a series ofauctions of paging licenses, offering a total of 16,630 non-nationwide geographic area licenses.43 The first auction will commence on February 24, 2000, and will consist of 2,499 licenses.44 Forpurposes of these auctions, a small business is defined as an entity that, together with affiliates andcontrolling principals, has average gross revenues for the three preceding calendar years of notmore than $15 million. The SBA has approved this definition.45 Given the fact that nearly allradiotelephone companies had fewer than 1,000 employees, and that no reasonable estimate of thenumber of prospective paging licensees could be made, the Commission has assumed, forpurposes of the evaluations and conclusions in the FRFA, that all the auctioned 16,630geographic area licenses would be awarded to small entities.46

20. In addition, our Third CMRS Competition Report estimated that as of January 1998,there were more than 600 paging companies in the United States.47 The Third CMRSCompetition Report also indicated that at least ten of the top twelve publicly held pagingcompanies had average gross revenues in excess of $15 million for the three years preceding


48 See Third CMRS Competition Report, App. C at 5.

49 The service is defined in section 22.99 of the Commission's rules, 47 C.F.R. § 22.99.

50 BETRS are defined in sections 22.757 and 22.759 of the Commission's rules, 47 C.F.R. §§ 22.757, 22.759.


52 The service is defined in section 22.99 of the Commission's rules, 47 C.F.R. § 22.99.

53 13 C.F.R. § 121.201, SIC Code 4812.

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1998.48 Data obtained from publicly available company documents and SEC filings indicate thatthis is also true for the three years preceding 1999.

21. Narrowband PCS. The Commission has auctioned 11 nationwide and 30 regionallicenses for narrowband PCS. The Commission does not have sufficient information to determinewhether any of these licensees are small businesses within the SBA-approved definition forradiotelephone companies. At present, there have been no auctions held for the major tradingarea (MTA) and basic trading area (BTA) narrowband PCS licenses. The Commission anticipatesa total of 561 MTA licenses and 2,958 BTA licenses will be awarded by auction. Such auctionshave not yet been scheduled, however. Given that nearly all radiotelephone companies have nomore than 1,500 employees and that no reliable estimate of the number of prospective MTA andBTA narrowband licensees can be made, we assume, for purposes of this FRFA, that all of thelicenses will be awarded to small entities, as that term is defined by the SBA.

22. Rural Radiotelephone Service. The Commission has not adopted a definition of smallentity specific to the Rural Radiotelephone Service.49 A significant subset of the RuralRadiotelephone Service consists of Basic Exchange Telephone Radio Systems (BETRS).50 Wewill use the SBA's definition applicable to radiotelephone companies, i.e., an entity employing nomore than 1,500 persons.51 There are approximately 1,000 licensees in the Rural RadiotelephoneService, and we estimate that almost all of them qualify as small entities under the SBA'sdefinition.

23. Air-Ground Radiotelephone Service. The Commission has not adopted a definitionof small entity specific to the Air-Ground Radiotelephone Service.52 Accordingly, we will use theSBA's definition applicable to radiotelephone companies, i.e., an entity employing no more than1,500 persons.53 There are approximately 100 licensees in the Air-Ground RadiotelephoneService, and we estimate that almost all of them qualify as small entities under the SBA definition.

24. Offshore Radiotelephone Service. This service operates on several UHF televisionbroadcast channels that are not used for TV broadcasting in the coastal area of the states


54 This service is governed by Subpart I of Part 22 of the Commission's Rules. See 47 C.F.R. §§ 22.1001-.1037.

55 13 C.F.R. § 121.201, SIC 4841.

56 1992 Economic Census Industry and Enterprise Receipts Size Report, Table 2D, SIC code 4841 (U.S. Bureau ofthe Census data under contract to the Office of Advocacy of the U.S. Small Business Administration).

57 47 C.F.R. § 76.901(e). The Commission developed this definition based on its determination that a small cablesystem operator is one with annual revenues of $100 million or less. Implementation of Sections of the 1992 CableAct: Rate Regulation, Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393 (1995),60 FR 10,534 (Feb. 27, 1995).

58 Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on figures for December 30, 1995).

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bordering the Gulf of Mexico.54 At present, there are approximately 55 licensees in this service. We are unable at this time to estimate the number of licensees that would qualify as small entitiesunder the SBA's definition for radiotelephone communications.

25. Wireless Communications Services (WCS). This service can be used for fixed,mobile, radio location and digital audio broadcasting satellite uses. The Commission defined“small business” for the WCS auction as an entity with average gross revenues that are not morethan $40 million for each of the three preceding years, and a “very small business” as an entitywith average gross revenues that are not more than $15 million for each of the three precedingyears. The Commission auctioned geographic area licenses in the WCS service. In the auction,there were seven winning bidders that qualified as very small business entities, and one thatqualified as a small business entity. We conclude that the number of geographic area WCSlicensees that may be affected by the actions taken in this Second Report and Order includes theseeight entities.

26. Cable Services or Systems. The SBA has developed a definition of small entities forcable and other pay television services, which includes all such companies generating $11 millionor less in revenue annually.55 This definition includes cable systems operators, closed circuittelevision services, direct broadcast satellite services, multipoint distribution systems, satellitemaster antenna systems and subscription television services. According to the Census Bureaudata from 1992, there were 1,788 total cable and other pay television services and 1,423 had lessthan $11 million in revenue.56

27. The Commission has developed its own definition of a small cable system operator forthe purposes of rate regulation. Under the Commission's rules, a “small cable company” is oneserving fewer than 400,000 subscribers nationwide.57 Based on our most recent information, weestimate that there were 1,439 cable operators that qualified as small cable system operators at theend of 1995.58 Since then, some of those companies may have grown to serve over 400,000


59 47 U.S.C. § 543(m)(2).

60 47 U.S.C. § 76.1403(b).

61 Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on figures for Dec. 30, 1995).

62 We do receive such information on a case-by-case basis only if a cable operator appeals a local franchiseauthority's finding that the operator does not qualify as a small cable operator pursuant to section 76.1403(b) of theCommission's rules. See 47 C.F.R. § 76.1403(d).

63 Second Report and Order, ¶¶ 6-28.

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subscribers, and others may have been involved in transactions that caused them to be combinedwith other cable operators. Consequently, we estimate that there are fewer than 1,439 smallentity cable system operators.

28. The Communications Act also contains a definition of a small cable system operator,which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than1 percent of all subscribers in the United States and is not affiliated with any entity or entitieswhose gross annual revenues in the aggregate exceed $250,000,000.”59 The Commission hasdetermined that there are 66,000,000 subscribers in the United States. Therefore, we found thatan operator serving fewer than 660,000 subscribers shall be deemed a small operator, if its annualrevenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250million in the aggregate.60 Based on available data, we find that the number of cable operatorsserving 660,000 subscribers or less totals 1,450.61 We do not request nor do we collectinformation concerning whether cable system operators are affiliated with entities whose grossannual revenues exceed $250,000,000,62 and thus are unable at this time to estimate with greaterprecision the number of cable system operators that would qualify as small cable operators underthe definition in the Communications Act. It should be further noted that recent industryestimates project that there will be a total of 66,000,000 subscribers.

(d) Description of Projected Reporting, Recordkeeping and Other ComplianceRequirements.

29. In this Second Report and Order we affirm our proposals in the NPRM to clarifywhat entities, services, and facilities are subject to CALEA.63 In addition, we provide guidanceregarding the factors the Commission will consider when determining under section 109 ofCALEA if compliance with the assistance capability requirements of the Act is reasonablyachievable, as well as the showings that entities filing petitions under section 109 will be expected


64 Id., ¶¶ 29-45.

65 See id., ¶¶ 36-45.

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to make.64 These actions impose no reporting, recordkeeping or other compliance requirementsbeyond those imposed by CALEA itself.

(e) Steps Taken to Minimize Significant Economic Impact on Small Entities, andSignificant Alternatives Considered.

30. We have largely adopted the tentative conclusions of the NPRM as to what entitiesare and are not subject to the assistance capability requirements. Although section 102(8)(B)(ii)of CALEA gives us the discretion, we have decided not to exempt any categories in our rules. We have resolved the concern mentioned most frequently in the comments—regarding thedispatch service of “traditional” SMR operators—by finding such operations to be outsideCALEA's definition of “telecommunications carrier” insofar as the service is not interconnectedwith the public switched network. We have considered AMTA's argument that CMRS providersserving niche business markets with limited interconnect capability are not technologically capableof CALEA compliance, but we have found that to the extent their services meet the definition ofCMRS set forth in section 332(d) of the Communications Act, such entities must be consideredsubject to CALEA. In response to those commenters who argue that a private mobile radioservice (PMRS) operator cannot be subject to CALEA for any reason, we have found that wherea PMRS operator uses its facilities to offer a service that qualifies as CMRS, that service issubject to CALEA.

31. We recognize that compliance with the assistance capability requirements may beeconomically burdensome for some entities. CALEA provides two mechanisms through whichcarriers may seek relief: they may petition the Commission for an extension of the compliancedate under section 107(c), and they may petition the Commission for a determination thatcompliance is not reasonably achievable under section 109(b). We believe these mechanismsprovide the best approach to avoiding undue burdens on small entities, without undercutting theobjectives of CALEA.65 We are also prepared to reexamine whether any categories of serviceproviders should be exempted, once we have gained some experience in applying section 109.

32. We have decided that in determining whether compliance with the assistancecapability requirements is reasonably achievable, we will not at this time accord specialsignificance to any particular factor enumerated in section 109 and we will not adopt anyadditional factors. As we note in the Report and Order, “the technological diversity of carriernetworks, as well as other carrier characteristics, will, as a matter of course, mean that certain


66 Id., ¶ 37.

67 See 5 U.S.C. § 801(a)(1)(A).

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factors will be more important to the arguments of certain carriers than others, and not all of thefactors enumerated in section 109 may be relevant to the analysis of a given reasonableachievability petition.”66 We recognize, however, that carrier size may be a significantconsideration in particular cases, and we reject AT&T's assertion that special consideration for anew market entrant could be tantamount to an unfair subsidy.

(f) Report to Congress

33. The Commission shall send a copy of this Second Report and Order, including thisFRFA, in a report to Congress pursuant to the Small Business Regulatory Enforcement FairnessAct of 1996.67 In addition, the Commission shall send a copy of this Second Report and Order,including this FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. Acopy of this Second Report and Order and FRFA (or summaries thereof) will also be published inthe Federal Register.

Before the SECOND REPORT AND ORDER

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